Quite frankly, I would not think of Facebook as a social network or Google as a search engine. Obviously we can interact and search information through them. This is not my point. What I mean is that it might be incorrect to consider those as being just a social network or search engine.
Rather, they are part of the club of social media consolidators, those who pretty much rule the way information is transmitted between individuals on the web. Their strategy consists in acquiring startups with a large base of registered users and/or developing new social platforms to expand their own user base.
For instance, you must probably be familiar with most of those service providers: Orkut, Socl, and/or Flickr. However, are you familiar with their respective owners? Orkut and Socl are respectively Google’s and Microsoft’s social media, and Flickr is a photo sharing service owned by Yahoo.
Look a bit around and you’ll take notice it is not an isolated case of social media consolidation: Bing and Skype are Microsoft’s property, Instagram joined Facebook’s wings in 2012 and Youtube will celebrate its seventh year of Google’s parenthood in 2013. Indeed, all those were acquired or launched by new media corporations which can be called social media consolidators.
To make sure you’ll follow the consolidation trend and start using their new services, they make use of various tactics. For example, they often ask – or require – you to create an account on their related services in order for you to use the platform you are interested in. Have you ever tried to open a Flickr account without signing in to Yahoo? Keep trying…
In some cases they may even create the account for you without your permission, just like Google did when integrating an Orkut and/or YouTube account to your Gmail one with you barely noticing it.
If you do not like and do not accept the new terms they set, they give you the freedom to leave anytime you want. But they have been locked you in socially for years and made it very inconvenient for you to quit the services they provide.
So far I managed to spot four social media consolidators: Microsoft, Google, Facebook and Yahoo.Those Big 4 account for hundreds of millions users and have their own specific competitive strengths and positioning to attract more users.
Facebook has more than 1 billion registered users, recently acquired Instagram, has an email address function, and is planning its entry into the search engine market. Microsoft manages Skype, Hotmail, Msn, Bing and Socl, next to controlling the PC operating system. Google is dominant in the search engine market, owns Youtube, Orkut, and offers many tools such as Gmail, AdWords, Google Docs, among others. Yahoo is also present on several fronts such as video-sharing, web-portals, Yahoo messenger and launched the now defunct Yahoo! Mash social media.
Historically speaking, media consolidation is nothing new. Large conglomerates such as The Walt Disney Company, Time Warner, Viacom, CBS organization have formed and dominated the way offline information was to be watched, also through the strategic acquisition of smaller media firms. History repeats itself, though what mattered to them was the number of viewers, whereas what social media integrators are after is the number of registered users.
This is why they develop new services and/or acquire other platforms: Take advantage of the synergistic and network effect in attracting users by offering more and more valuable services, and push people to adopt them.
By the way they are willing to pay big prices to get some more users, and this is good news if you are currently building a platform with the potential to attract a few million.
Alexandre Francois
alexandre.francois@studbocconi.it
Articles written by the various members of our team.
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